For the week 12/7-12/11

[Posted 7:00 AM ET…Kiawah, S.C.] 

Note: Due to travel, the bulk of the following was written by noon on Thursday. For the archives, I may add a few items I missed in the next review. 

“The nervousness of millions of Americans is entirely justifiable. They see economic head winds all about them. The biggest economy in the world is held hostage by shoppers and consumers who are scared and pessimistic.” 

And politics is getting in the way of good policy, with President Obama seeking to divert some of the $200 billion in lower than expected TARP spending to boost job creation rather than pay down the deficit, as he promised on the campaign trail. The Wall Street Journal observed, “TARP is now morphing into a revolving line of Democratic political credit.” 

Here, and in the U.K. in particular, it’s more than ever about the 2010 elections. In the U.S., Democrats are scared to death about the unemployment rate and anger at the polls come next November. In the U.K., Prime Minister Gordon Brown is attempting to turn around dire poll numbers before he has to call an election, probably next May, so he’s turning to populist themes such as bank bashing.  To wit:

“(We) agree that a one-off tax in relation to bonuses should be considered a priority, due to the fact that bonuses for 2009 have arisen partly because of government support for the banking system. 

“However, it is clear the action that must be taken must be at a global level. No one territory can be expected to or be able to act on its own. And if we can find a solution, implemented consistently across the major economies, then we may find a way to ensure that taxpayers do not pay in a systemic crisis for the risks taken on by the banking sector…. 

“Stability and confidence requires us to bring financial markets into closer alignment with the values held by families and business owners: Rewarding hard work, responsibility, integrity and fairness. 

“People rightly want a post-crisis banking system which puts their needs first. To achieve that, nothing less than a global change is required.” 

Towards this end, Congress is slowly reaching consensus on sweeping regulatory reform, while moral suasion, and the power of the pay czar, are beginning to impact the way bonuses are paid out, which may or may not appease an angry public.

That\’s part of the big picture look at things.  This past week it was also about global debt loads from the likes of Greece, Ireland, and Spain, where government debt is about 3 times the preferred limit of the European Union as a whole.  Sovereign debt ratings have been lowered, to near junk status in the case of Greece, and, just as in the case with Dubai World, concerns are arising over the ripple effects as the possibility of a sovereign default rises, even if it\’s still far down the road.

In the end, though, markets around the world were generally mixed as this resilient global bull market refuses to correct in any serious way.  And there was some legitimate good news, whether it was stronger than expected retail sales here, with a solid increase in a leading barometer of consumer confidence, or the state of the economy in China.

Regarding the latter, China\’s factory output in November soared 19%, and retail sales rose 16%, while exports declined slightly from a year ago, the best reading on this all year, another sign of improvement, and imports in China rose 27%.  A leading think tank reiterated that 9% growth in GDP is in the cards for 2010 as the government tinkers with its stimulus program in an effort to keep things running smoothly without sectors such as real estate bubbling over.

But in Japan, GDP for the third quarter was revised sharply downward as the government here announced a stimulus effort to try to stave off a return to recession.

In Europe, talk about banker bonuses and special levies and taxes on same ruled the day, with leaders in the U.K. and France calling for 50% one-off surcharges to try to recoup some of the monies spent on bailing out the financial sector as it recovers, but at the same time there are some, such as bank expert Meredith Whitney, who maintain that any improvement on the part of the financial industry is but temporary, particularly in the U.S., where it\’s felt that despite a decent retail sales or confidence figure the consumer isn\’t\’ getting any better and the problem with bad loans will only continue for the foreseeable future. 

Still surly attitudes are perhaps best summed up in a Bloomberg survey that has just 32% of Americans believing the country is headed in the right direction, vs. 40% who felt this way in September.

But while the above may be enough to entice those Democrats currently on the fence to fall in behind Senate Majority Leader Harry Reid, others, such as Sen. Russell Feingold (D-Wis.), criticized the deal because it didn’t allow for the public option he seeks.  Regardless, we have a long ways to go before, first, the Senate passes a plan, and then, second, the Senate and House reconcile their versions; one containing a public option, the other probably not. Neither, though, addresses the long-term issue. 

Robert Samuelson / Washington Post 

“President Obama’s critics sometimes say that he is engineering a government takeover of health care or even introducing “socialized medicine” into America. These allegations are wildly overblown. Government already dominates health care, one-sixth of the economy…. 

“What’s happening (today) is (actually) the reverse….Health care is taking over government. Consider: In 1980, the federal government spent $65 billion on health care; that was 11 percent of all its spending. By 2008, health outlays had grown to $752 billion – 25 percent of the total, one dollar in four. 

“Even without new legislation, the health share would grow, as an aging population uses more Medicare (insurance for the elderly) and Medicaid (the joint federal-state insurance for the poor, including the very poor elderly)…. 

“All this is transforming politics and society. The most obvious characteristic of health spending is that government can’t control it. The reason is public opinion. We all want the best health care for ourselves and loved ones….Unfortunately, what we all want as individuals may harm us as a nation.” 

Meaning…the soaring deficits, which in the future are only compounded by spending on health. 

Lastly, as climate talks got underway in Copenhagen, one of the leaders of the movement, James Hansen, reiterated in an op-ed for the New York Times that cap and trade is the wrong approach because it “does little to slow global warming or reduce our dependence on fossil fuels. It merely allows polluters and Wall Street traders to fleece the public out of billions of dollars.” 

“Because cap and trade is enforced through the selling and trading of permits, it actually perpetuates the pollution it is supposed to eliminate. If every polluter’s emissions fell below the incrementally lowered cap, then the price of pollution credits would collapse and the economic rationale to keep reducing pollution would disappear.” 

Wall Street of course stands to benefit in what will be a loosely regulated market for trading the permits, thus opening the game to speculators and derivatives products. 

Hansen’s solution remains “fee and dividend.” Collect gradually rising carbon fees, say at the port of entry for coal, oil and gas, and then the collected fees would be distributed to the public to make up for the rising cost of carbon-emitting fuel. “Those who do better than average in choosing less-polluting goods would receive more in the dividend than they pay in added costs.” 

“Consider the perverse effect cap and trade has on altruistic actions. Say you decide to buy a small, high-efficiency car. That reduces your emissions, but not your country’s. Instead it allows somebody else to buy a bigger S.U.V. – because the total emissions are set by the cap. 

“In a fee-and-dividend system, every action to reduce emissions – and to keep reducing emissions – would be rewarded….Popular demand for efficient vehicles could drive gas guzzlers off the market. Such snowballing effects could speed us toward a pollution-free world.” 

I’ll have more next week following President Obama’s appearance in Copenhagen, including the ‘other side’ of the debate. But for now understand that 850 companies have already signed on to a cap and trade system as long as they know what the long-term costs are so that they can manage them when it comes to meeting emissions cuts. 

And just a brief word on Iran, which remains very much an imminent market-moving issue. 

Israeli intelligence believes Iran has enough enriched uranium for one bomb and has the capability to deliver a warhead, though were this true Iran would need more than enough material for a few bombs if it wanted to first carry out a test, for starters. 

But this was a week where protesters once again took to the streets of Tehran and other large cities across Iran. At least 200 were arrested as heroic opposition leader Mir Hossein Mousavi said: 

“They ask us to forget about the [June 12] election results as if the problem is only the elections. The problem of our people is not who the head of the government is or who is not. The problem is that this few are bolstering their egos to the shame of a great nation. You fight on the streets, but you are constantly losing your dignity in people’s minds.” 

Mousavi was later harassed at his office and surrounded by 30 Basij thugs when he tried to get away in his car. He got out and shouted at them, “You’re agents. Do whatever you’ve been ordered to do, kill me, beat me, threaten me,” before his aides hustled him back inside. [Jerusalem Post] 

For his part, Supreme Leader Ayatollah Ali Khamenei said the West is lying about Iran’s nuclear energy program, adding “the entire truth will eventually become clear to the world and the enemies will be humiliated more than ever before,” as reported by the Tehran Times. 

Curiously, though, there were reports Khamenei asked former president and power broker Rafsanjani to persuade Mousavi to relent, but Rafsanjani refused. His own daughter has been part of the opposition movement and was evidently detained. 

I watched President Obama’s solid speech on Thursday in accepting the Nobel Peace Prize but as usual he didn’t want to say anything about the Iranian protesters. What’s needed is pressure and incentives, he says of nations like Iran and North Korea.  “Condemnation without discussion” doesn’t work, the president said.  But we have abandoned the opposition in Iran and on the nuclear weapons front the clock continues to tick. 

The Federal Open Market Committee meets next week, plus there will be a slew of economic news on the housing front, as well as key data on inflation and industrial production. 

–George Will / Washington Post 

“At (Ben) Bernanke’s recent confirmation hearing on his nomination for a second four-year term, Jim DeMint, a South Carolina Republican who is co-sponsoring a Senate version of (Congressman Ron) Paul’s bill, asked Bernanke: ‘Do you believe that employment should be a mission, a goal of the Federal Reserve?’ Bernanke, who had already noted Congress’ ‘mandate’ that the Fed ‘achieve maximum employment and price stability,’ answered that the Fed ‘can assist keeping employment close to its maximum level through adroit policies.’ 

“That mandate was, however, improvidently given. Congress created the Fed and can control it, and eventually will do so if the Fed eagerly embraces the role of the economy’s comprehensive manager. America’s complex, dynamic economy cannot be both ‘managed’ and efficient.  Attempting to manage it is an inherently political undertaking, and if the Fed undertakes it, the Fed will eventually bring upon itself minute supervision by Congress. 

“Rep. Paul Ryan (R-Wis.), has, as usual, a better idea: Repeal the Humphrey-Hawkins Full Employment Act of 1978 that, he says, ‘dangerously diverted the Fed from its most important job: price stability.’ For 65 years after its creation in 1913, the Fed’s principal duty was to preserve the currency as a store of value by preventing inflation from undermining price stability. Humphrey-Hawkins gave it the second duty of superintending economic growth.” 

I concur. Let the Fed focus on price stability, solely. 

–Saudi Arabian Oil Minister Ali al-Naimi said that crude prices were in “the right range.”  

“Inventories are coming down, the price is perfect, and all investors, consumers, producers – they’re all very happy,” he said. Speak for yourself, Ali.  But now crude is coming down, at least for a week, settling below $70.

–The Obama administration declared carbon dioxide a dangerous pollutant, paving the way for the government to require businesses to make costly changes to machinery to reduce emissions – even without climate change legislation out of Congress. But before some of us go ballistic, as the president of the U.S. Chamber of Commerce, Thomas Donohue, said, “The devil will be in the details,” and we don\’t know them yet. 

–Treasury Secretary Tim Geithner has taken issue with Goldman Sachs and its claims that it could have withstood the financial crisis without government assistance. Geithner said all banks were at risk then, and he’s right. 

Separately, Paul Volcker said Goldman shouldn\’t get taxpayer support if the firm focuses on trading over banking, as is the case these days.

–Kuwait’s sovereign wealth fund made a $1 billion profit after selling its stake in Citigroup, less than two years after acquiring preferred shares during the financial crisis. 

–A study by Next 10, a nonprofit research group, has determined that the number of green companies in California surged 45% from 1995 to 2008, with the total jobs in energy efficiency, renewable fuels and clean tech growing 36%. During the same period general employment in the state expanded just 13%. 

–Toyota is under the microscope again. This time it’s for sudden stalling in some Corolla and Matrix models as the National Highway Transportation Safety Agency examined a slew of complaints. This comes on the heels of the improperly installed floor mats and sudden acceleration. Additionally, some pickup trucks suffer from corrosion issues that could lead to dropped parts on the road, including the spare tire. One would think this all will have a substantial impact on sales. Thus far its market share in the U.S., however, has remained flat. 

–VW is buying a 20% stake in Japan’s Suzuki Motor in a deal that would create the world’s largest carmaker alliance. It will be similar to Renault’s hook-up with Nissan. Just a week ago, Peugeot Citroen said it was buying a stake in Mitsubishi.  

–I’ve said my piece on gold the last few months. I felt it was absurd that some called it a great inflation hedge when it hasn’t been. Remember, on an inflation-adjusted basis gold should be trading around $2300 if it was keeping up with consumer prices since 1980. 

And as to the dollar trade, I said that when Israel attacks Iran and money goes rushing into the dollar, look out below. 

But I never thought gold would get to $1100, let alone $1200, and I’m not going to gloat over its recent slide when it’s still above where I thought it would be. Small investors should just think about why they are buying it. If it’s because the world is going to hell and paper currencies are increasingly worthless, fine. Come Armageddon, you’ll be able to exchange your coins for pasta and tuna fish, while I won’t even be able to get my paper out of the bank. 

But there was a highly-publicized piece by Nicholas Larkin and Millie Munshi of Bloomberg this week that had some thoughts similar to those I’ve expressed in the past, as well as ammo for the bulls.. 

“Investors who paid $850 an ounce back in January 1980 earned 44 percent as gold reached a record $1,226.56 on Dec. 3 in London. The S&P 500 stock index produced a 22-fold return with dividends reinvested, Treasuries rose 11-fold and cash in the average U.S. checking account rose at nearly 92 percent…. 

“Those who bought gold when it reached a two-decade low of $251.95 in August 1999 have seen a 387 percent return, more than four times the 82 percent gain in Treasuries. An investment in the S&P 500 lost 0.4 percent through the end of last month…. 

“Since the S&P 500 peaked in October 2007, investors in the index lost 25 percent, holders of Treasuries made 16 percent and gold buyers are up 64 percent." 

–As aluded to above Ireland’s economy faces further turmoil as the government is looking to slash spending some $6 billion to stabilize things, while it is also seeking pay cuts of on average 6% by public sector workers. [The salary of the prime minister is to be reduced 20%, cabinet ministers 15%.]  Massive protests, beyond those already seen, are in the works. But what’s this? VAT and excise taxes on beer and spirits are to be reduced 12% to 14%? Slanche! 

–In the 4th quarter of 2007, Iceland’s economy grew at an annualized rate of 7.3%. In the 3rd quarter of 2009, it fell at an annualized rate of 7.2%.  

“We are at the end of a difficult generation of business leadership…tough-mindedness, a good trait, was replaced by meanness and greed, both terrible traits. Rewards became perverted. The richest people made the most mistakes with the least accountability…. 

“The bottom 25 percent of the American population is poorer than they were 25 years ago. That is just wrong. Ethically, leaders do share a common responsibility to narrow the gap between the weak and the strong.” 

–Crazy goings on at leading west coast bond manager TCW Group as investment chief Jeffrey Gundlach suddenly left, taking 14 of his staff  with him. This is no small deal as TCW has some $110 billion under management (of which Gundlach was responsible for $65 billion) and now the U.S. Treasury Department froze funds being managed by TCW as part of the Publi-Private Investment Program that invested in toxic bank assets. Funds are flying out the door. 

Gundlach says he proposed a $700 million management-led buyout in September and didn’t get a response, but he had also been in negotiations with other top shops. 

For its part, once TCW caught wind Gundlach was leaving, it acquired Metropolitan, West Asset Management LLC, another fixed income outfit with a solid reputation, but many investors will vote with their feet, having put theif faith in Gundlach. 

–As a result of TCW’s problems, I can just imagine how neighbor PIMCO is licking its chops. Bill Gross’ Total Return Fund is now the largest mutual fund in history (unofficially) at about $202 billion, surpassing the mark set by Growth Fund of America in 2007 before the crash.  

When I was at PIMCO, we continually talked of size being an asset (“Who do you think gets the first look? Who gets the best terms?” etc.) though now the fund is so big you wonder how it can continue to outperform, but until it doesn\’t, over more than one year, you’re wrong if you doubt Gross\’ ability to outperform the market.

PIMCO also took a major step this week to get into the actively managed stock fund game, hiring Neel Kashkari, who was in charge of the Treasury’s bank bailout program for a spell and is a former Goldman Sachs executive, to spearhead the effort from a development standpoint. [The part of the company I used to work for is now part of German insurance giant Allianz, which distributes its own actively managed stock funds, though none is managed by PIMCO.] 

–Eight years after AOL completed its merger with Time Warner and destroyed more than $100 billion in shareholder value, AOL began trading as an independent company again. 

–Just 38 days after going bankrupt, small- and mid-sized business lender CIT Group reemerged as a new company with an uncertain future. Taxpayers, who shelled out $2.3 billion in an original lifeline, as well as shareholders of the old company were wiped out. Private investors provided most of the new capital. 

–China’s carbon dioxide emissions, which accounted for 21 percent of the global total in 2006, will account for 29 percent in 2030 as emissions rise from six billion tons to 13 billion, which is almost twice the 2030 projection for the U.S., 6.9 billion. It’s all about coal. 

–In 2008, Indian tribes operated 442 casinos in 28 states. In terms of revenues, Oklahoma is now the second biggest behind California, surpassing Connecticut. 

–H1N1 is ebbing. But will it return with a vengeance in 2010? It’s certainly a risk factor. 

–Rolling Stone’s Matt Taibbi on former Treasury Secretary Robert Rubin. 

“The irony of Bob Rubin: He’s an unapologetic arch-capitalist demagogue whose very career is proof that a free-market meritocracy is a myth. Much like Alan Greenspan, a staggeringly incompetent economic forecaster who was worshipped by four decades of politicians because he once dated Barbara Walters, Rubin has been held in awe by the American political elite for nearly 20 years despite having [expletive deleted] every project he ever got his hands on. He went from running Goldman Sachs (1990-92) to the Clinton White House (1993-1999) to Citigroup (1999-2009), leaving behind a trail of historic gaffes that somehow boosted his stature every step of the way. 

“As Treasury secretary under Clinton, Rubin was the driving force behind two monstrous deregulatory actions that would be primary causes of last year’s financial crisis: the repeal of the Glass-Steagall Act (passed specifically to legalize the Citigroup megamerger) and the deregulation of the derivatives market. Having set that time bomb, Rubin left government to join Citi, which promptly expressed its gratitude by giving him $126 million in compensation over the next eight years (they don’t call it bribery in this country when they give you the money post-factum). After urging management to amp up its risky investments in toxic vehicles, a strategy that very nearly destroyed the company, Rubin blamed Citi’s board for his screw-ups and complained that he had been underpaid to boot. ‘I bet there’s not a single year where I couldn’t have gone somewhere else and made more,’ he said." 

–Every time I go overseas, I try to remember to pick up some foie gras, which is increasingly banned just about everywhere in the world thanks to animal-rights groups. 75% of it now comes from France and activists plan a rally in Paris today, Saturday. Turns out 44% of the French favor a ban on traditional foie gras production, which involves force-feeding ducks and geese to enlarge their livers to four times normal size.   

–Value Line fired its chief statistician, Samuel Eisenstadt, after 63 years at the company. Eisenstadt, 87, said “I refuse to accept the explanation that I’m retiring….I don’t plan to retire. My mind is still sharp and wrapped up in my work. This is a very sad ending, and it really hurts.” 

Oh, give it a rest. Your firm, Mr. Eisenstadt, turned out be a bunch of crooked charlatans. [Just five weeks ago, CEO Jean Bernhard Buttner was forced out after 21 years when the SEC ruled that Value Line had defrauded customers for two decades by overcharging them for mutual fund trades. The firm agreed to $45 million in penalties.] 

–Howard Stern is letting on that he won’t be re-signing his contract at Sirius XM Radio once it expires at the end of next year. Some say, though, that Stern is just using the threat as a negotiating ploy. It was in late 2004 that Stern signed a contract giving him $500 million in cash and stock over five years. In early 2006, he got a bonus of 34.4 million shares, then valued at $225.8 million. 

–On Tuesday, China executed a former securities trader for embezzlement, the first person in the industry to be put to death, according to a state newspaper. Yang Yanming took $9.52 million to his grave, not having given up the location of the funds.

[James Grant, writing in the Wall Street Journal, noted that in this country’s founding monetary legislation, the Coinage Act of 1792, the death penalty could be “prescribed for any official who fraudulently debased the people’s money.” Grant related this to today’s printing of dollar bills to lift Wall Street, which is in his mind “a kind of fraud.” Ergo, Ben Bernanke is lucky to have escaped the hangman’s noose.] 

Foreign Affairs 

Iraq: The coordinated suicide attacks in Baghdad that killed 127 were clearly the work of al-Qaeda in Iraq and designed once again to try and upend the electoral process, with the vote having been pushed back to March 6 or 7 from late January. What the attacks did was force Prime Minister Nouri al-Maliki to fire his security minister. 

Israel: Prime Minister Netanyahu tried to get the Palestinians to move on the peace front through his 10-month freeze on most settlement construction, but thus far, while the Palestinians have balked (for good reason…let’s face it), hard-liners in Israel protested against Netanyahu’s move, with at least 10,000 turning out the other day as their spokesman stupidly said, “Netanyahu intends to withdraw from all of Judea and Samaria and to create a Palestinian state in the heart of Israel. Do not believe him when he says the freeze is temporary. Do you trust him?” “No!” yelled back the crowd. 

Give me a break. I grow weary of this faction; as I’ve noted before the same one that has a history of taking out its own leaders. Netanyahu is the best friend they’ve had, but his settlement action is merely a smokescreen to divert attention from the real task at hand…Iran. 

Meanwhile, Israel has been upset at some in the European Union, such as the Swedes, who have the presidency now, who say East Jerusalem is to be the capital of a future Palestinian state, but EU foreign ministers dropped this idea and said Jerusalem should be the capital of both Israel and a future Palestinian state, assuaging Israeli anger. Even the Palestinians liked this one. 

[As an aside, President Obama went out of his way to praise Turkish Prime Minister Erdogan during the latter\’s trip to Washington, with Erdogan saying his nation was ready to play the role of mediator between Israel and the Palestinians, and Israel and Syria. The problem is Erdogan’s recent actions speak otherwise as his Islamist tendencies have become more and more apparent, a dangerous sign. Obama went overboard, but I was encouraged the two met for hours. Turkey is a critical player these days, particularly when it comes to Iran.] 

Afghanistan: Little of note happened here this week, which is generally a good thing. Defense Secretary Robert Gates confirmed on the Sunday talk shows that he doesn’t have a clue where Osama bin Laden is, admitting we’ve lacked good intelligence, though President Obama’s National Security Advisor, James Jones, said it appears bin Laden has gone back and forth across the border into Afghanistan, while Gates said the Pakistanis can’t be faulted because they’ve had zero presence in the tribal region of North Waziristan where it\’s assumed bin Laden is. 

On the issue of sending in more troops, a Quinnipiac poll has 57% of Americans believing it’s the “right thing” to fight the war in Afghanistan, up from 48% on Nov. 18. 

Pakistan: While the news was on the light side in Afghanistan, it was bleak on the Pakistani front. It got to the point where it was hard to keep up with all the attacks but it would appear at least four major ones claimed about 100 lives; this while President Zardari is accused of holding $1.5 billion in assets around the world by the main anticorruption body that has also thrown Zardari’s old case back into the Supreme Court. Zardari already served 11 years in prison for corruption and murder, was allowed to leave the country in 2004, and then was let back in under a grant of amnesty in 2007. Two months later his wife, Benazir Bhutto, was assassinated, leaving Zardari in charge after President Musharraf resigned in August 2008. What a country. 

Separately, there is the disturbing, developing tale of five missing Americans, Muslim students, who were arrested in Pakistan on suspicion of plotting terrorist attacks. All five are U.S. citizens; three of Pakistani descent, one Egyptian and one Yemeni. They had been living with their families in northern Virginia before suddenly disappearing last month, with one leaving behind a “farewell” video message. They\’ve now told Pakistani authorities they were out to wage jihad.

Egypt: Mohamed ElBaradei, the former head of the International Atomic Energy Agency, said he wants to run for president here, but not only does ElBaradei have no power base in Egypt, he’s demanded the election be transparent and fat chance of that happening as 81-year-old President Hosni Mubarak picks his own successor; probably his intelligence chief, Omar Suleiman, as a caretaker for a term before turning things over to Mubarak’s youngest son, Gamal, a process that won’t make the people real happy. 

North Korea: Protests and violence have been growing in light of Kim Jong-il’s move to seize most of his citizens’ money and savings through the new-currency scheme. It’s sickening and, again, nothing from President Obama. Instead we sent envoy Stephen Bosworth to attempt to get the North Koreans back to the negotiating table, but the White House admitted they don’t expect any progress. 

Philippines: President Arroyo declared martial law in parts of the southern Philippines with scores arrested in the aftermath of the worst political violence in the country’s history, the attack Nov. 23 on a convoy that killed 57, including 30 journalists. The government finally appears to be cracking down on clan leaders that had once been seen as allies who helped keep the peace, but it was a clan dispute that led to the massacre. We’ve also now learned that 21 of the victims were sexually mutilated. The Ampatuan clan responsible for it all may be implicated in up to 200 other killings in the region. 

China/Taiwan: Taiwanese President Ma’s popularity has been sliding, down to just 33 percent, as the opposition DPP won some key local elections. The DPP favors formal independence for Taiwan, while Ma is losing support over a potential trade deal with the mainland. 

In Shenzhen, there has been an awful series of kidnappings for ransom where children are being abducted and often killed even if a ransom is paid. Five such cases have occurred in six months, one in which an 11-year-old boy was taken, his parents, both top executives, paid a $500,000 ransom, but the boy had already been murdered. You can’t fathom that. 

Romania: There is a combustible situation here as a presidential election ended in an impossibly close vote…50.33 percent to 49.66, with the incumbent President Basescu emerging victorious and the opposition claiming foul. 

Among the many problems faced by Romania is further economic turmoil, with GDP having contracted about 8 percent this year, while the European Union and the International Monetary Fund press for budget reforms.  

Russia: When I went to post last time, I said there had been a nightclub fire in Perm but didn’t know the exact details at the time. 141 died as a pyrotechnic display ignited a ceiling decorated with twigs. The thing is the club didn’t have a permit to use them. A witness said, “The fire took seconds to spread. It was like a dry haystack. There was only one way out. They nearly stampeded me.” 

On the weather front, Moscow Mayor Yuri Luzhkov has made no secret of his attempts to control the amount of snowfall. He’d prefer there be none, so it should come as no surprise that he blasted weather forecasters who said the other day the city would receive a half inch but instead received six inches, which caused spectacular tie-ups on the roads, with cars abandoned on the major highway. And get this, City Hall said it was useless to send its 6,000-strong fleet of snowplows out during peak hours and instead blamed the meteorology office. 

Venezuela: President Hugo Chavez said he had received thousands of Russian-made missiles and rockets to beat back any threat from Colombia as the psycho leader continues to tell his people the United States and Colombia are going to launch an invasion (as if we don’t already have enough on our plate). Separately, Chavez is having to deal with a burgeoning banking scandal that has claimed one leading government official and threatens others. Seven small banks have been taken over by the government, as the banks evidently were making large loans to companies run by the bank’s owners, many of whom are allies of Chavez. 

“America’s nerves are frayed and tempers are short. The country is uneasy, even queasy, because Obama and Congress seem to be dashing through an ambitious agenda in a slapdash manner. Their haste reflects a hubris that prevents them from acknowledging that they do not know how to do all that they are attempting. Consider the exasperation of Lamar Alexander. 

“A Tennessee Republican of mild mien, Alexander is a former governor and former president of the University of Tennessee. For seven years in the Senate he has been a model of the moderate Republicanism that is, we are mournfully told by the Republican Party’s non-Republican moral auditors, as valuable as it is scarce. So it was noteworthy that he recently had this to say about Senate Majority Leader Harry Reid’s proposed health-care legislation: 

“ ‘This bill is historic in its arrogance – arrogance that we in Congress are wise enough to take this complex healthy system, that is 17 percent of our economy and serves 300 million Americans, and think we can write a 2,000-page bill and change it all…It’s arrogant to dump 15 million low-income Americans into a medical ghetto called Medicaid that none of us or any of our families would ever want to join.’ 

“Alexander is not the only temperate person who is being driven to distraction by the sense that whirl is now king in Washington. And by the worry that the people driving the pell-mell agenda will not pause to ask how to do all of it, because they fear that the answer is: You can’t.” 

–There has been no bigger supporter of Barack Obama than Rolling Stone magazine. As it noted in its December 10, 2009 issue: 

“It seemed clear to us that Obama had the makings of a transformational leader, a man of destiny equal to the challenges he would inherit from George W. Bush…. 

“A year later, we’re starting to wonder (as) Obama has largely handed over the job of fixing the economy to the very people who helped destroy it: a cabal of former bankers and D.C. insiders connected to Clinton-era Treasury secretary Robert Rubin. So far, this group has done little to crack down on the banks that turned the nation’s financial markets into rigged casinos. In fact, (as Matt) Taibbi reports, the changes Obama’s team is fighting would make it even easier for banks to get bailed out when their risky bets crash. In other words, rather than halting Big Finance’s takeover of economic policy, begun under Bush, Obama only seems to be institutionalizing it." 

–At the risk of offending some of you, I can’t help but bring up an interesting piece by Hanna Rosin in the December 2009 “The Atlantic” titled “Did Christianity Cause the Crash?” 

“Osteen is often derided as Christianity Lite, but he is more like Positivity Extreme. ‘Cast down anything negative, any thought that brings fear, worry, doubt, or unbelief,’ he urges. ‘Your attitude should be: ‘I refuse to go backward. I am going forward with God. I am going to be the person he wants me to be. I’m going to fulfill my destiny.’’ Telling yourself you are poor, or broke, or stuck in a dead-end job is a form of sin and ‘invites more negativity into your life,’ he writes. Instead, you have to ‘program your mind for success,’ wake up every morning and tell yourself, ‘God is guiding and directing my steps.’ The advice is exactly like the message of The Secret, or any number of American self-help blockbusters that edge toward magical thinking, except that the religious context adds another dimension…. 

“[Osteen writes of a man he met on vacation in Hawaii, who while admiring a gorgeous house on a hill, says] ‘I can’t even imagine living in a place like that’….For this bit of self-deprecation and modesty, Osteen pities the man: ‘His own thoughts and attitudes,’ he writes, ‘were condemning him to mediocrity,’ or what is known in the gospel as the ‘defeated life.’ 

“A few pages later [Your Best Life] comes the corrective, the model of a ‘victor’ and not a ‘victim.’ Osteen and his wife, Victoria, are walking around their neighborhood in Houston when they pass a beautiful house being built. ‘Most of the other homes around us were one-story, ranch-style homes that were forty to fifty years old, but this house was a large two-story home, with high ceilings and oversized windows,’ he writes. ‘It was a lovely, inspiring place.’ Victoria desperately wanted a house ‘just like it,’ but Joel was worried about how stretched they already were. ‘Thinking of our bank account and my income at the time, it seemed impossible to me,’ he writes. But this, of course, is an example of ungodly, negative thinking. With her unwavering faith, Victoria wouldn’t let it drop. Soon she convinced Joel and then he, too, started to believe that ‘God could bring it to pass.’ There is no explanation of how they came to own such a house – whether Osteen worked hard to grow his ministry or got rich from his RB show or received an inheritance from his father’s estate. In this story they are standing in for an average middle-class couple who set their sights on a bigger house and believed, despite all the financial evidence, that God would bestow it upon them, like a gift. And he did.” 

But Rick Warren, whose book The Purpose Driven Life outsold Osteen’s, told Time, “This idea that God wants everybody to be wealthy? There is a word for that: baloney. It’s creating a false idol. You don’t measure your self-worth by your net worth. I can show you millions of faithful followers of Christ who live in poverty. Why isn’t everyone in the church a millionaire?” 

Some say that from the roots of the above spawned a generation who paid little attention to predatory lending, relaxed credit standards, or the dangers of using one’s home equity as an ATM. 

–It appears South Carolina Gov. Mark Sanford will escape impeachment as a state legislative panel rejected a resolution to begin the process of removing him. Sanford will be censured instead, an act that goes on his permanent resume, thus making it more difficult for him to find work at, say, Home Depot or Dunkin’ Donuts. 

–Uh oh. In what scientists are calling a once-in-a-century event, a monster iceberg, twice the size of Hong Kong Island (I’m reading of this in a China paper) is inching its way toward Australia. The iceberg fell off Antarctic about 10 years ago and had been slowly floating round the continent until it decided to head north. 

–In a study out of the Harvard Medical School involving 50,000 men over 20 years, those who drank 6 or more cups of coffee a day had a 60% lower risk of developing the advanced form of prostate cancer that is the deadliest. 

Overall, the National Cancer Institute reports that deaths from all forms of the disease decreased 1.65% a year from 2001 to 2006. 

And the World Health Organization reports that “94 percent of people remain unprotected by comprehensive smoke-free laws," which shows that much more work needs to be done. A report by the World Lung Foundation said smoking could kill a billion people this century if trends hold, with only 17 nations having comprehensive smoke-free laws. 

Remember back when you’d go out to dinner and someone at a table next to you would be blowing smoke your way and you’d have to ask them to be more careful, and they’d then give you a look like [forget it, kid]? Remember? Where do you think all those jerks are today? 

–As to the whole climate change issue, since day one I’ve maintained it’s being mislabeled. It’s about global pollution. If it looks or smells bad, there’s no way it’s good for us. It’s that simple. I don’t have a lot of sympathy for a company with a coal-belching plant in the U.S., or a chemical plant in China that is poisoning the water system. To me the debate isn’t about rising temperatures and disappearing glaciers, with rising waters and a few countries in the Pacific losing their land or some Americans losing their beach home. [Bangladesh is an exception but that’s a topic for a different day.] 

It’s about how we are killing each other today. Responsible corporations already recognize this. If we stop poisoning the air and water, perhaps one result will be stability in global temps, though I doubt that part. At least, though, it’s a potential by-product of just plain responsible living, whether it is here or in Asia. 

To me it’s like the health-care debate. We’re missing the obvious, such as in doing more on the preventative front and tackling our obesity epidemic, neither of which requires costly legislation. 

It’s why I increasingly really don’t give a damn about some of these debates. The world is replete with idiots (and egomaniacs and charlatans) and there’s little we can do about it, except one thing. Exercise your right to vote, and when there is a situation like in Iran, where a reform movement is being beaten back, it is our responsibility, through our elected officials, to insist our president stand up for the little people guy. 

I’m off to run a half-marathon shortly here in Kiawah. I’ll try and come up with solutions for all the world’s problems during the two hours it should take me. Afterwards, some domestic. 

— 

Gold closed at $1119
Oil, $69.87…has broken down after 8 weeks between $76 and $80. 

Returns for the week 12/7-12/11 

Returns for the period 1/1/09-12/11/09 

Have a great week. I appreciate your support.